Max Healthcare and other PE players bid to acquire CARE Hospitals

INDIA -Strategic and private equity investors including Blackstone, CVC Capital, Temasek, and Max Healthcare are in the race to acquire Care Hospitals from Evercare, a wholly owned entity of TPG Growth, business daily Economic Times has reported.

Care Hospitals is among the largest hospital chains in the country and the deal involving 2,400 beds—15 hospitals in India and two in Bangladesh—will value it at around Rs 7,500 crore (US$941 million), the report said.

If the deal goes through, it would be India’s second-largest hospital buyout after the IHH-Fortis transaction in 2018.

The first round of bids is in and two-three entities would be shortlisted in a few weeks, the report said. Investment banks Rothschild and Barclays are advising TPG on the sale process.

Care Hospitals began as a cardiac hospital in 1997 in Hyderabad with 100 beds and now has a network of 15 facilities in six states with more than 2,400 beds offering 30 clinical specialties in India and Bangladesh.

It has two hospitals in the Bangladeshi capital Dhaka with 1,000 beds. Care added 250 beds in July by acquiring Indore-based CHL Hospitals for Rs 350 crore (US$44 million).

In 2018, TPG Growth-backed Evercare acquired the healthcare portfolio of UAE’s Abraaj Growth Markets Health Fund, which owned a majority stake in CARE Hospitals.

India’s healthcare industry has been growing at a compounded annual growth rate (CAGR) of about 22 percent since 2016. At this rate, it is expected to reach US$372 billion in 2022, a 2021 Niti Ayog report said.

A 2020 Human Development Report said that India ranked 155th in bed availability, with five beds and 8.6 doctors per 10,000 people.

India needs to add 3.6 million beds, 3 million doctors, and 6 million nurses over the next 20 years, a recent PwC report said.

The hospital industry would require an investment of around US$245 billion over the next 20 years, the report said.

On August 16th, Kohlberg Kravis Roberts & Co LP (KKR), a New York-based private equity firm, sold its remaining 27.5% stake in Max Healthcare, a hospital chain in India, for INR 9,185 crores (USS$1.2 billion)—registering a 5x return in four years.

In 2018, KKR bought a 49.7% stake in the company at INR 80 per share (US$1), selling it off at INR 353 (US$4.4) per share.

The potential of Indian Healthcare

Indian healthcare has been an attractive destination for Private Equity investments.

The first PE investment in Indian healthcare was in 1999 by UK-based global asset management company Schroder Ventures, which invested in Indraprastha Medical Corporation Ltd.

Since then, several foreign-based PE investors have picked up equity stakes in large Indian healthcare providers.

Most recently, Ontario Teachers’ Pension Plan Board acquired a majority stake in Sahyadri Hospitals from the Everstone Group; Investcorp divested its entire stake in ASG Hospital, an ophthalmology chain, clocking 5x returns.

So far, PE exits from healthcare, and related sectors entailed 55 deals in 2021, up from 32 in 2020 (the value of the exits remained more or less the same at around US$1.39 Billion.

Despite negative market sentiment, 2022 is shaping to be a busy year for Indian healthcare.

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